Auto slowdown continues as Jan sales dip 6%, coronavirus to delay recovery

Sale of passenger cars, a key barometer of vehicles sales, continued to decline in November despite significant discounts by automakers. This indicates that the sector is yet to recover from the worst auto slowdown in India in more than a decade.

Domestic passenger vehicle sales fell 6.2 per cent year-on-year to 262,714 units in January from 280,091 in the same period last year, according to data released by the Society of Indian Automobile Manufacturers (SIAM).

On Monday, auto stocks witnessed a massive fall due to the widespread impact of a weak January sales and fear of the coronavirus effect on the supply chain system. The virus has virtually put China on a lockdown, straining the global supply chain system. “Deliveries for February will certainly be delayed,” Gaurav Gupta, chief commercial officer at MG Motor India had said.

It remains to be seen if the ongoing Auto Expo – the extravaganza where automakers display their new products and technologies – will be able to reverse the trend. Showroom sales for two-wheelers and commercial vehicles also reported double digit decline, indicating that the current economic slowdown is far from over. 

The poor sales growth in January is similar to the trend in December last year which came in two months after a marginal recovery in October and November. The automakers offered record discounts to lure customers during the festival season.

“According to me, the slowdown is still continuing and the bump in October and November was due to festive buy,” Guenter Butschek, managing director (MD) & chief executive officer (CEO) at Tata Motors had recently told Business Standard.

December had also seen healthy discounts on BS-IV products, as companies are trying to dispose of their inventories fast as the transition to BS-VI norms kick in from April 1, 2020.

Also, most manufacturers witnessed a decline in wholesale numbers during the month. This is because production was reduced to control the inventory of BS-IV vehicles, at dealerships before the transition into BS-VI.

Showroom sales for two-wheelers and commercial vehicles also reported double-digit decline, indicating that growth is still far away. 

“Vehicle sales continued to be stressed due to rising cost of ownership and slower growth in GDP,” said Rajen Wadhera, president at SIAM.

Wadhera expects that the recent push on infrastructure and rural economy by the government will increase sales, primarily two-wheelers and commercial vehicles.

Two-wheelers recorded a decline of 16.06 per cent in sales with 13,41,005 units being sold in January this year compared to 15,97,528 units in the same month of last year. 

Wadhera cited poor consumption in rural areas as the reason for the fall in sales growth of two-wheelers. Commercial and passenger vehicles recorded a fall of 14.98 per cent and 14.04 per cent, respectively, in January 2020, compared to last year.